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Markets Set a High Bar for Sterling to Appreciate on Any BOE Signals

03/08/2022 3:16pm

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Markets Set High Bar For Pound to Gain on BOE Policy Hints

1301 GMT - Markets have set a high bar for sterling to appreciate on any signals by the Bank of England on the expected pace of future interest rate rises at Thursday's meeting, Vantage says. Markets expect the BOE to raise its key rate 50 basis points to 1.75% on Thursday and see another 50bp move in September with rates peaking close to 3% early next year, Vantage analyst Jamie Dutta writes. The BOE is under pressure to abandon its gradual approach to raising rates, he says. "The recent depreciation in the pound over the last few months also reflects a perception by markets that the UK is failing to keep pace and falling behind its central bank peers." (renae.dyer@wsj.com)

Companies News: 
 

Molten Ventures Remuneration Report Resolution Gets Low Votes at AGM

Molten Ventures PLC said Wednesday that the resolution to approve the directors' remuneration report got a significant number of votes against at its annual general meeting, but that all resoluitions passed.

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Redx Pharma Science Chief, Certain Employees to Sell 1.5 Mln Shares

Redx Pharma plc said Wednesday that Chief Scientific Officer Richard Armer and a number of other employees are selling up to 1.5 million ordinary shares in the company at a minimum price of 59 pence each.

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Dye & Durham May Appeal UK Regulator's Decision to Enforce the Sale of TMG

Canadian cloud-based software company Dye & Durham Ltd. said that it is considering appealing a U.K. regulator's decision to force the sale of recently-acquired TM Group (UK) Ltd.

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Scirocco Energy in Default of Prolific Basins Investment Loan After Resolutions Fail

Scirocco Energy PLC said Wednesday that following the failure of two resolutions proposing the removal of certain restrictions on the issue of shares, the company is in default of the Prolific Basins LLC investment loan.

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Canaccord Expands UK, European Footprint with Acquisition of Results International

Canaccord Genuity Group Inc. said Wednesday that it is expanding its global advisory business through the acquisition of U.K.-based Results International Group LLP for an undisclosed sum.

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London Southend Airport Appoints New CEO; Airline Support Campaign Gathers Pace

London Southend Airport said Wednesday that it has appointed John Upton as its new chief executive officer, effective from September, replacing Glyn Jones in the role.

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Vaalco Energy Cuts Guidance After Unsuccessful Well in Gabon

Vaalco Energy Inc. on Wednesday cut guidance due to the performance of the South Tchibala 1HB-ST well offshore Gabon.

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Accsys Technologies Finance Director William Rudge to Step Down by January

Accsys Technologies PLC said Wednesday that Finance Director William Rudge has decided to resign from the company after 12 years of service, to pursue new opportunities.

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Mustang Energy PLC Acquisition of 27.4% in VRFB Holdings Limited

TIDMMUST

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Hill & Smith 1H Revenue, Profit Rose on Pricing Action, Market Resilience

Hill & Smith Holdings PLC said Wednesday that revenue and pretax profit for the first half rose thanks to pricing actions taken to recover input cost inflation and the resilience of its end markets.

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Zinc Media Launches Discounted Share Placing to Buy the Edge Picture

Zinc Media Group PLC said Wednesday that it is launching a share placing and retail offer at a discounted price to raise 5 million pounds ($6.1 million) and acquire the Edge Picture Co.

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EnSilica FY 2022 Revenue Soared, Driven by Strong Order Book

EnSilica PLC said Wednesday that revenue and adjusted Ebitda for fiscal 2022 were ahead of market views, driven by an increasing number of contracts.

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Ariana Resources Says 2022 Kiziltepe Guidance Remains Unchanged

Ariana Resources PLC said Wednesday that 2022 gold production guidance for the Kiziltepe mine in Turkey has been maintained at 25,000 ounces.

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Creo Medical Group 1H Revenue Rose as Number of Endoscopy Technology Users Doubled

Creo Medical Group PLC said Wednesday that it expects to report increased revenue for the first half of 2022 as the company benefited from strong momentum and more users of its endoscopy technology.

 
Market Talk: 

Inflation, Tight Labor Market Argue for 50Bps BOE Interest Rate Rise

1337 GMT - The Bank of England will accelerate the interest rate rise path to a 50 basis point move on Thursday, Nuveen chief investment strategist Brian Nick says in a note. Inflation is accelerating and becoming more broad-based in the U.K. despite recent softening in core goods prices, while inflation expectations have also picked up and the labor market is quite tight, he says. "All of these factors increase the probability that the Bank [of England] will want to get rates up sooner for the same reason the Federal Reserve has been picking up its pace of increases," he says. Recent growth in the labor force, in theory taking some pressure off wages, would argue against the 50bp consensus increase, he says. (emese.bartha@wsj.com)

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Rolls-Royce Set for Higher 1H Revenue

1335 GMT - Rolls-Royce Holdings is forecast to report revenue for 1H on at GBP5.44 billion, up from GBP5.16 billion the same period a year earlier, according to a consensus estimate provided by FactSet. Investors will be looking for signs of a rebound in demand as the airline industry continues to recover from the Covid-19 pandemic, but also for comments on labor issues and wages as inflation bites for the engineering company, which has around 14,000 employees in the U.K. Shares trade up 2.6% at 90.06 pence. Rolls-Royce is due to report 1H results on Thursday. (kyle.morris@dowjones.com)

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Hiscox Looks Well-Placed to Cope With Inflationary Pressures

1308 GMT - Hiscox's cash-reserve buffer looks robust and the specialist insurer is well placed to manage inflationary pressures, Citi's analyst Joshua Mark Hole says in a research note following a investors call. "Included within the actuarial estimate is a $55 million precautionary net inflation load that is said to be over and above the level of claims inflation the company is actually seeing," Hole says. However, the reason behind Wednesday's share-price fall could be the growth outlook, which seems subdued, he says. Shares are down 2.3% at 855.4 pence. (michael.susin@wsj.com)

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BOE Could Stick to Gradual Approach to Raising Rates

1258 GMT - The Bank of England is widely expected to step up the pace of interest rate rises on Thursday but it might act more cautiously as it faces a tough trade-off between inflation and economic growth, Vantage says. "Recent comments by BOE Governor Andrew Bailey have put a 50 basis points hike on the table but given there's not been a lot of recent economic data to signal a bigger move, there is a chance we simply get another quarter point rate hike," Vantage analyst Jamie Dutta writes. That means there's likely to be split vote among policy makers, he says. (renae.dyer@wsj.com)

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Hiscox Takes 1H Investment-Return Hit

1208 GMT - Hiscox drops 2% after the Lloyd's of London insurer reported a swing to a 1H pretax loss, though gross premiums written rose. The pretax loss was 17% worse than expected owing to lower investment returns, mainly from unrealized losses, RBC Capital Markets says. Underwriting performance broadly matched expectations, though growth in the firm's U.S. direct and partnerships division will remain weaker this year and the interim dividend of $0.12 slightly missed consensus expectations of $0.14, RBC says. "At first glance, we think the update is largely in line with our expectations and consistent with the 1Q update," RBC analyst Derald Goh says in a note. "The growth outlook in U.S. DPD might warrant further explanation, given high expectations," he says. (philip.waller@wsj.com)

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Pound Pares Gains Vs Dollar, Turns Lower Vs Euro After UK PMI Data

1120 GMT - Sterling pares its gains against the dollar and turns weaker versus the euro after July's U.K. services purchasing managers' index was unexpectedly revised lower. The final reading for July's services PMI was 52.6, down from a preliminary estimate of 53.3 and compared with 54.3 in June, according to S&P Global/CIPS. It marked the slowest growth in services activity in 17 months. "While the data may result in some intraday weakness in sterling, GBP/USD is likely to remain range-bound as market focus looks towards tomorrow's Bank of England meeting and the highly anticipated interest rate announcement," Silicon Valley Bank's Sam Cooper says. GBP/USD falls to 1.2175 after the data from 1.2200 beforehand. EUR/GBP rises to 0.8370 from 0.8351. (renae.dyer@wsj.com)

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Expected UK Rate Hike Would Hit First-Time House Buyers Hard

1100 GMT - With the Bank of England expected to raise rates by a further 0.5% on Thursday, new first-time buyers would see mortgage payments increase to an average of 40% of their gross salary, a level not seen since 2012, Rightmove calculates. Should the U.K.'s central bank hike rates by 0.5% as expected--the largest interest rates increase since 1995--the average monthly mortgage rate would increase to exceed GBP1,000, the online property portal says. "A new record first-time buyer asking price of GBP224,943 means that a 10% deposit for a first-time buyer type home is now 57% higher than it was ten years ago, while average salaries have only increased by 31%," Tim Bannister, Rightmove's property data expert says in a note. (joseph.hoppe@wsj.com)

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Taylor Wimpey's Slowing Sales Rate Isn't a Problem

1044 GMT - Taylor Wimpey's first-half numbers are solid, it has sold in advance most of its expected volumes for 2022, with the orderbook looking packed and shares cheap, Goodbody says. The house builder has reported that customer interest remains buoyant, cancellations are still low and forward-looking metrics look strong, Goodbody analyst Shane Carberry says in a research note. "We do... recognize that the slowing sales rate in recent weeks may prove to be a focus for some investors but the rationale as to why it has slowed makes sense--i.e. managing the order book--in our eyes and whilst it is certainly something to watch, it is not yet a worry for us," the Irish brokerage says. Goodbody retains its buy recommendation on the stock, which it says offers significant value. Shares are up 4.4% at 125.3 pence. (joseph.hoppe@wsj.com)

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Taylor Wimpey's 1H Results Impress Despite Market Skepticism

1027 GMT - Taylor Wimpey's first-half results were undeniably impressive, and unlike some of its peers it is both on track to hit volume targets and is outpacing inflationary and interest-rate pressures for now, AJ Bell says. The house builder has however, like the rest of the sector, had its shares sold off throughout 2022, suggesting the market reckons they can't win this race forever, AJ Bell investment director Russ Mould says in a research note. That said, Taylor Wimpey has a strong balance sheet, it has invested in land at attractive prices and--paired with the long-standing supply and demand imbalance in the U.K. housing market--there's at least some confidence in the long-term outlook, the brokerage says. Shares are up 4.5% at 125.4 pence. (joseph.hoppe@wsj.com)

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Taylor Wimpey's Strong Results Lead to Forecast Upgrades

1012 GMT - Taylor Wimpey's first-half results came in slightly ahead of expectations, and the company expects full-year operating profit to be at the top end of the market consensus range driven by strong pricing, Credit Suisse says. The house builder's strong results and upgraded guidance leads the Swiss bank to raise its 2022 Ebit estimate to GBP921 million, 2.5% ahead of the market consensus. "Although July sales rates look weak, we view this as a function of both an already long order book--89% sold for the year--and the prioritization of price over volume, supporting margin expectations into 2023," CS analysts say in a note. CS retains its outperform rating and 210 pence price target on the stock. Shares are up 4.5% at 125.4 pence. (joseph.hoppe@wsj.com)

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Serco Looks Set to Benefit From Inflationary Tailwinds

1008 GMT - Serco Group's potential to benefit from accelerating growth in U.S. defense spending and the expansion of the U.S. Navy is underappreciated by the market, Citi says. The U.K. outsourcing company's vast majority of contracts provide some kind of inflation protection, and with inflationary increases applying on the anniversary of contracts being signed, it's reasonable to expect results to benefit from at least a mid-single-digit inflation tailwind, Citi analysts say in a research note. Serco is scheduled to report its first-half results on Thursday, and "we expect Serco to highlight improved [foreign exchange] and inflationary tailwinds across its business," the U.S. bank says. Citi retains its buy rating on the stock and 244 pence price target. Shares are down 1.4% at 184.1 pence. (joseph.hoppe@wsj.com)

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Sterling Unlikely to Be Affected by UK Leadership Race

1006 GMT - Sterling is unlikely to be affected by the U.K. Conservative Party's leadership race between Liz Truss and Rishi Sunak, Commerzbank says. Truss is the favorite to become prime minister in the polls but she probably isn't the market's preferred choice as she has a more free-spending policy stance, takes a tough line against the EU and wants to evaluate the Bank of England's mandate, Commerzbank currency analyst Antje Praefcke says in a note. Political interference in monetary policy isn't popular in the currency market, she says. However, there's no reason for sterling weakness before the leadership contest final outcome, she says. "Even afterwards there is unlikely to be a huge change in Tory policy if Truss really does win." (renae.dyer@wsj.com)

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Taylor Wimpey Gains as Higher Prices Offset Cost Rises

0952 GMT - Shares in Taylor Wimpey top the FTSE 100 risers, up 4%, and other U.K. house-builders gain after Taylor reported higher first-half pretax profit and forecast full-year operating profit at the top end of market expectations. "This was a good set of numbers against the backdrop of record performance last year," Hargreaves Lansdown analyst Matt Britzman says in a note. "There's still a structural supply/demand imbalance in the U.K. propping up prices despite consumer spending power falling. Cost inflation remains a thorn, running around 9-10% but fully offset by higher prices for now. It remains to be seen how long that can continue, but while it does, shareholders can continue to expect solid returns." (philip.waller@wsj.com)

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BOE Expected to Lift Interest Rates More Decisively, Set Out Active QT

0905 GMT - The Bank of England is likely to act more forcefully against high inflation at Thursday's meeting with a 50-basis-points interest rate increase, Goldman Sachs Asset Management says. The central bank also looks set to say it will begin active quantitative tightening in October at a quarterly pace of GBP10 billion, Goldman macro strategist Gurpreet Gill writes. The BOE will probably raise its short-term and medium-term inflation forecasts while cutting its 2022 economic growth forecasts, she says. The BOE will remain data-dependent with its policy decisions and willing to act aggressively if high inflation persists, she says. "Despite the risks to growth, firm inflation and a tight labor market are supportive of further tightening beyond this month's meeting." (renae.dyer@wsj.com)

 

Contact: London NewsPlus, Dow Jones Newswires;

 

(END) Dow Jones Newswires

August 03, 2022 10:01 ET (14:01 GMT)

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